ENGLEWOOD, Colo.--(BUSINESS WIRE)--Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2012
net income of $174.7 million, or $1.62 per share on a diluted basis,
compared with net income of $174.1 million, or $1.53 per share on a
diluted basis in the fourth quarter of 2011. Excluding certain items in
both the fourth quarters of 2012 and 2011 as described in the non-GAAP
earnings reconciliation table found below, net income of $132.4 million,
or $1.22 per share on a diluted basis, in the fourth quarter of 2012
compared with net income of $157.3 million, or $1.38 per share on a
diluted basis, in the fourth quarter of 2011.

Fourth-quarter sales of $5.40 billion declined 1 percent from sales of
$5.44 billion in the prior year. Pro forma for acquisitions and
excluding the impact of foreign currency, sales declined 3 percent year
over year.

“We delivered strong results in the fourth quarter, with non-GAAP
earnings per share of $1.22 well ahead of our expectations, and strong
cash flow from operations. Our ECS business performed especially well
with sales up 11 percent over last year’s fourth quarter,” said Michael
J. Long, chairman, president, and chief executive officer. “We had an
excellent year, balancing our short-term initiatives and our long-term
strategic priorities.”

Global components fourth-quarter sales of $3.19 billion decreased 7
percent year over year. Pro forma for acquisitions and excluding the
impact of foreign currency, sales declined 9 percent year over year.
Sales in the Asia-Pacific region increased 7 percent year over year,
driven by strong growth in China and the ASEAN region. In the Americas,
sales declined 6 percent year over year due to ongoing market weakness
amid economic uncertainty. European sales were down 20 percent year over
year in local currency, reflecting a weakening in the Euro Zone
economies during the quarter and a prospective change in the accounting
for revenue related to certain fulfillment contracts.

Global enterprise computing solutions (“ECS”) fourth-quarter sales of
$2.22 billion increased 11 percent year over year. Pro forma for
acquisitions and excluding the impact of foreign currency, sales
increased 6 percent year over year. On a global basis, ECS delivered
impressive double-digit year-over-year growth in storage, software, and
services. In the Americas sales growth was at the midpoint of normal
seasonality in the core value-added distribution business. In Europe,
sales were at the high end of normal seasonality in local currency with
strength across all regions.

FULL-YEAR

Arrow’s net income for 2012 was $506.3 million, or $4.56 per share on a
diluted basis, compared with net income of $598.8 million, or $5.17 per
share on a diluted basis in 2011. Excluding certain items in both 2012
and 2011 as described in the non-GAAP earnings reconciliation table
found below, net income of $488.4 million, or $4.40 per share on a
diluted basis, in 2012 compared with net income of $601.4 million, or
$5.19 per share on a diluted basis, in 2011.

2012 sales of $20.41 billion declined 5 percent from sales of $21.39
billion in 2011. Pro forma for acquisitions and excluding the impact of
foreign currency, sales also declined 5 percent year over year.

“Cash flow is again a great story as we generated $675 million in cash
from operations in 2012, again meaningfully exceeding our target for
cash conversion,” said Paul J. Reilly, executive vice president, finance
and operations, and chief financial officer. “In 2012, we returned over
$250 million to shareholders through our stock repurchase program,
bringing the total returned to shareholders to more than $800 million
over the past 5 years.”

GUIDANCE

Looking ahead to the first quarter of 2013, there remains economic
uncertainty in the United States due to the ongoing fiscal cliff and
budget negotiations. Fourth-quarter U.S. GDP numbers showed the first
contraction in the U.S. economy in over three years. The Euro Zone’s
economy also contracted in the fourth quarter and there are no
meaningful signs of improvement for the near term.

In light of these negative economic indicators, the company remains
cautious in the outlook for business activity in the first quarter and
would expect less than normal seasonality in the global components
business. With this economic uncertainty as a backdrop, the company is
embarking on an incremental productivity enhancement program that will
include expense reductions of $40 million on an annual basis.

“As we look to the first quarter, we believe that total sales will be
between $4.6 billion and $5.0 billion, with global components sales
between $3.05 billion and $3.25 billion and global enterprise computing
solutions sales between $1.55 billion and $1.75 billion. As a result of
this outlook, we expect earnings per share, on a diluted basis,
excluding any charges to be in the range of $.80 to $.92 per share. Our
guidance assumes an average tax rate in the range of 28 to 29 percent,
average diluted shares outstanding are expected to be 108.3 million, and
the average Euro to USD exchange rate for the first quarter is 1.35 to
1,” said Mr. Reilly.

Please refer to the CFO commentary as a supplement to the company’s
earnings release, which can be found at www.arrow.com/investor.

Arrow Electronics (www.arrow.com)
is a global provider of products, services and solutions to industrial
and commercial users of electronic components and enterprise computing
solutions. Arrow serves as a supply channel partner for more than
100,000 original equipment manufacturers, contract manufacturers and
commercial customers through a global network of more than 470 locations
in 55 countries.

Certain Non-GAAP Financial Information

In addition to disclosing results that are determined in accordance with
Generally Accepted Accounting Principles (“GAAP”), the company provides
certain non-GAAP financial information relating to operating income, net
income attributable to shareholders and net income per basic and diluted
share, each as adjusted for certain charges, credits, and gains and
losses that the company believes impact the comparability of its results
of operations. These charges, credits, and gains and losses arise out of
the company’s efficiency enhancement initiatives, acquisitions, and
settlement of certain legal and tax matters. A reconciliation of the
company’s non-GAAP financial information to GAAP is set forth in the
table below.

The company believes that such non-GAAP financial information is useful
to investors to assist in assessing and understanding the company’s
operating performance and underlying trends in the company’s business
because management considers the charges, credits, and gains and losses
referred to above to be outside the company’s core operating results.
This non-GAAP financial information is among the primary indicators
management uses as a basis for evaluating the company’s financial and
operating performance. In addition, the company’s Board of Directors may
use this non-GAAP financial information in evaluating management
performance and setting management compensation.

The presentation of this additional non-GAAP financial information is
not meant to be considered in isolation or as a substitute for, or
alternative to, operating income, net income and net income per basic
and diluted share determined in accordance with GAAP. Analysis of
results and outlook on a non-GAAP basis should be used as a complement
to, and in conjunction with, data presented in accordance with GAAP.

ARROW ELECTRONICS, INC.

EARNINGS RECONCILIATION

(In thousands except per share data)

(unaudited)

Quarter EndedDecember 31,

Year EndedDecember 31,

2012

2011

2012

2011

Operating income, as reported

$

264,168

$

232,183

$

804,123

$

908,843

Restructuring, integration, and other charges

11,285

14,135

47,437

37,811

Settlement of legal matters

(79,158

)

-

(79,158

)

5,875

Operating income, as adjusted

$

196,295

$

246,318

$

772,402

$

952,529

Net income attributable to shareholders, as reported

$

174,704

$

174,088

$

506,332

$

598,810

Restructuring, integration, and other charges

6,320

11,223

30,739

28,054

Settlement of legal matters

(48,623

)

-

(48,623

)

3,609

Gain/(adjustment) on bargain purchase

-

410

-

(668

)

Loss on prepayment of debt

-

549

-

549

Reversal of valuation allowance on deferred tax assets

-

(28,928

)

-

(28,928

)

Net income attributable to shareholders, as adjusted

$

132,401

$

157,342

$

488,448

$

601,426

Net income per basic share, as reported

$

1.64

$

1.55

$

4.64

$

5.25

Restructuring, integration, and other charges

.06

.10

.28

.25

Settlement of legal matters

(.46

)

-

(.45

)

.03

Gain/(adjustment) on bargain purchase

-

-

-

(.01

)

Loss on prepayment of debt

-

-

-

-

Reversal of valuation allowance on deferred tax assets

-

(.26

)

-

(.25

)

Net income per basic share, as adjusted

$

1.25

$

1.40

$

4.47

$

5.27

Net income per diluted share, as reported

$

1.62

$

1.53

$

4.56

$

5.17

Restructuring, integration, and other charges

.06

.10

.28

.24

Settlement of legal matters

(.45

)

-

(.44

)

.03

Gain/(adjustment) on bargain purchase

-

-

-

(.01

)

Loss on prepayment of debt

-

-

-

-

Reversal of valuation allowance on deferred tax assets

-

(.25

)

-

(.25

)

Net income per diluted share, as adjusted

$

1.22

$

1.38

$

4.40

$

5.19

The sum of the components for basic and diluted net income per
share, as adjusted, may not agree to totals, as presented, due to
rounding.

Information Relating to Forward-Looking Statements

This press release includes forward-looking statements that are subject
to numerous assumptions, risks, and uncertainties, which could cause
actual results or facts to differ materially from such statements for a
variety of reasons, including, but not limited to: industry conditions,
the company's implementation of its new enterprise resource planning
system, changes in product supply, pricing and customer demand,
competition, other vagaries in the global components and global ECS
markets, changes in relationships with key suppliers, increased profit
margin pressure, the effects of additional actions taken to become more
efficient or lower costs, risks related to the integration of acquired
businesses, changes in legal and regulatory matters, and the company’s
ability to generate additional cash flow. Forward-looking statements are
those statements, which are not statements of historical fact. These
forward-looking statements can be identified by forward-looking words
such as "expects," "anticipates," "intends," "plans," "may," "will,"
"believes," "seeks," "estimates," and similar expressions. Shareholders
and other readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which
they are made. The company undertakes no obligation to update publicly
or revise any of the forward-looking statements.

For a further discussion of factors to consider in connection with these
forward-looking statements, investors should refer to Item 1A Risk
Factors of the company’s Annual Report on Form 10-K for the year ended
December 31, 2012.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

Quarter Ended

Year Ended

December 31,

December 31,

2012

2011

2012

2011

(unaudited)

Sales

$

5,402,705

$

5,440,473

$

20,405,128

$

21,390,264

Costs and expenses:

Cost of sales

4,695,861

4,695,664

17,667,842

18,441,661

Selling, general, and administrative expenses

480,103

469,757

1,849,534

1,892,592

Depreciation and amortization

30,446

28,734

115,350

103,482

Restructuring, integration, and other charges

11,285

14,135

47,437

37,811

Settlement of legal matters

(79,158

)

-

(79,158

)

5,875

5,138,537

5,208,290

19,601,005

20,481,421

Operating income

264,168

232,183

804,123

908,843

Equity in earnings of affiliated companies

2,346

1,936

8,112

6,736

Interest and other financing expense, net

22,233

28,443

101,876

105,971

Other

-

1,562

-

(193

)

Income before income taxes

244,281

204,114

710,359

809,801

Provision for income taxes

69,460

29,984

203,642

210,485

Consolidated net income

174,821

174,130

506,717

599,316

Noncontrolling interests

117

42

385

506

Net income attributable to shareholders

$

174,704

$

174,088

$

506,332

$

598,810

Net income per share:

Basic

$

1.64

$

1.55

$

4.64

$

5.25

Diluted

$

1.62

$

1.53

$

4.56

$

5.17

Average number of shares outstanding:

Basic

106,223

112,024

109,240

114,025

Diluted

108,105

113,878

111,077

115,932

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

December 31,

2012

2011

ASSETS

Current assets:

Cash and cash equivalents

$

409,684

$

396,887

Accounts receivable, net

4,923,898

4,482,117

Inventories

2,052,720

1,963,910

Other current assets

328,999

181,677

Total current assets

7,715,301

7,024,591

Property, plant and equipment, at cost:

Land

23,944

23,790

Buildings and improvements

152,008

147,215

Machinery and equipment

1,030,983

934,558

1,206,935

1,105,563

Less: Accumulated depreciation and amortization

(607,294

)

(549,334

)

Property, plant and equipment, net

599,641

556,229

Investments in affiliated companies

65,603

60,579

Intangible assets, net

414,033

392,763

Cost in excess of net assets of companies acquired

1,711,703

1,473,333

Other assets

279,406

321,584

Total assets

$

10,785,687

$

9,829,079

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

3,769,268

$

3,264,088

Accrued expenses

776,586

660,996

Short-term borrowings, including current portion of long-term debt

364,357

33,843

Total current liabilities

4,910,211

3,958,927

Long-term debt

1,587,478

1,927,823

Other liabilities

300,636

267,069

Equity:

Shareholders' equity:

Common stock, par value $1:

Authorized – 160,000 shares in 2012 and 2011

Issued – 125,424 and 125,382 shares in 2012 and 2011, respectively

125,424

125,382

Capital in excess of par value

1,086,239

1,076,275

Treasury stock (19,423 and 13,568 shares in 2012 and 2011,
respectively), at cost

(652,867

)

(434,959

)

Retained earnings

3,279,289

2,772,957

Foreign currency translation adjustment

182,632

158,550

Other

(37,495

)

(29,393

)

Total shareholders' equity

3,983,222

3,668,812

Noncontrolling interests

4,140

6,448

Total equity

3,987,362

3,675,260

Total liabilities and equity

$

10,785,687

$

9,829,079

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Quarter EndedDecember 31,

2012

2011

Cash flows from operating activities:

Consolidated net income

$

174,821

$

174,130

Adjustments to reconcile consolidated net income to net cash
provided by operations:

Depreciation and amortization

30,446

28,734

Amortization of stock-based compensation

9,685

8,945

Equity in earnings of affiliated companies

(2,346

)

(1,936

)

Deferred income taxes

(23,380

)

(10,899

)

Restructuring, integration, and other charges

6,320

11,223

Excess tax benefits from stock-based compensation arrangements

54

(435

)

Other

(1,446

)

(554

)

Change in assets and liabilities, net of effects of acquired
businesses:

Accounts receivable

(554,201

)

(329,943

)

Inventories

37,140

214,783

Accounts payable

374,959

42,788

Accrued expenses

146,052

(10,755

)

Other assets and liabilities

(10,354

)

20,423

Net cash provided by operating activities

187,750

146,504

Cash flows from investing activities:

Cash consideration paid for acquired businesses

(90,668

)

(9,238

)

Acquisition of property, plant and equipment

(36,650

)

(25,674

)

Net cash used for investing activities

(127,318

)

(34,912

)

Cash flows from financing activities:

Change in short-term and other borrowings

(17,607

)

1,984

Proceeds from (repayment of) long-term bank borrowings, net

19,600

(243,000

)

Repurchase of senior notes

-

(19,324

)

Proceeds from exercise of stock options

1,891

47

Excess tax benefits from stock-based compensation arrangements

(54

)

435

Repurchases of common stock

(38,075

)

(242

)

Net cash used for financing activities

(34,245

)

(260,100

)

Effect of exchange rate changes on cash

24,947

829

Net increase (decrease) in cash and cash equivalents

51,134

(147,679

)

Cash and cash equivalents at beginning of period

358,550

544,566

Cash and cash equivalents at end of period

$

409,684

$

396,887

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year EndedDecember 31,

2012

2011

Cash flows from operating activities:

Consolidated net income

$

506,717

$

599,316

Adjustments to reconcile consolidated net income to net cash
provided by operations:

Depreciation and amortization

115,350

103,482

Amortization of stock-based compensation

34,546

39,225

Equity in earnings of affiliated companies

(8,112

)

(6,736

)

Deferred income taxes

(5,414

)

(11,377

)

Restructuring, integration, and other charges

30,739

28,054

Excess tax benefits from stock-based compensation arrangements

(5,029

)

(7,956

)

Other

(5,786

)

4,309

Change in assets and liabilities, net of effects of acquired
businesses:

Accounts receivable

(318,689

)

(193,492

)

Inventories

(62,383

)

105,150

Accounts payable

406,874

(465,603

)

Accrued expenses

38,858

(74,236

)

Other assets and liabilities

(52,638

)

747

Net cash provided by operating activities

675,033

120,883

Cash flows from investing activities:

Cash consideration paid for acquired businesses

(281,918

)

(532,568

)

Acquisition of property, plant and equipment

(112,224

)

(113,941

)

Purchase of cost method investment

(15,000

)

-

Net cash used for investing activities

(409,142

)

(646,509

)

Cash flows from financing activities:

Change in short-term and other borrowings

(9,812

)

(6,172

)

Proceeds from (repayment of) long-term bank borrowings, net

(5,400

)

354,000

Repayment of bank term loan

-

(200,000

)

Repurchase of senior notes

-

(19,324

)

Proceeds from exercise of stock options

13,372

46,665

Excess tax benefits from stock-based compensation arrangements

5,029

7,956

Repurchases of common stock

(260,870

)

(197,044

)

Net cash used for financing activities

(257,681

)

(13,919

)

Effect of exchange rate changes on cash

4,587

10,111

Net increase (decrease) in cash and cash equivalents

12,797

(529,434

)

Cash and cash equivalents at beginning of year

396,887

926,321

Cash and cash equivalents at end of year

$

409,684

$

396,887

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION

(In thousands)

Quarter EndedDecember 31,

Year EndedDecember 31,

2012

2011

2012

2011

(unaudited)

Sales:

Global components

$

3,185,764

$

3,443,034

$

13,361,122

$

14,853,823

Global ECS

2,216,941

1,997,439

7,044,006

6,536,441

Consolidated

$

5,402,705

$

5,440,473

$

20,405,128

$

21,390,264

Operating income (loss):

Global components

$

122,989

$

176,680

$

619,282

$

823,774

Global ECS

114,249

106,413

290,970

262,893

Corporate (a)

26,930

(50,910

)

(106,129

)

(177,824

)

Consolidated

$

264,168

$

232,183

$

804,123

$

908,843

(a)

Includes restructuring, integration, and other charges of $11.3
million and $47.4 million for the quarter and year ended December
31, 2012 and $14.1 million and $37.8 million for the quarter and
year ended December 31, 2011, respectively. Also includes a gain
of $79.2 million for the quarter and year ended December 31, 2012
and a charge of $5.9 million for the year ended December 31, 2011,
both of which are related to the settlement of legal matters.